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China on Thursday pledged to extend limits on new home purchases to smaller cities as authorities step up efforts to cool the country's red-hot real estate market. The State Council, or cabinet, said it would tighten existing property restrictions in cities that have seen excessive price rises to push them “back to reasonable levels”.


”Now is a critical moment for property curbs. (We) must not swerve or relax the strength of enforcement” the State Council said in a statement after a meeting chaired by Premier Wen Jiabao.

The cabinet also renewed calls for local governments to start work on up to 10 million state-subsidised apartments by the end of November, adding that construction on half of the target had started by the end of June.

China has introduced a range of measures aimed at reducing house prices since late 2009, such as bans on buying second homes in some cities, hiking minimum down-payments and trialling property taxes in Shanghai and Chongqing.

Beijing is worried that very high property prices, along with soaring food costs, could trigger social unrest as first-home buyers struggle to get a foot in the market.

To tame inflation, the central bank has been trying to stem a flood of credit in the economy by raising interest rates five times since October and increasing the amount of money banks must keep in reserve numerous times. But official data shows property sales and investment remain strong.

Investment in property development rose 32.9% on year to 2.6 trillion Yuan (405.7bn dollars) in the first half, while sales in terms of floor space increased 12.9% in the same period, government data showed Wednesday.

On Wednesday it was reported that China's economic growth had slowed further in the second quarter. Growth was 9.5% in the three months to the end of June compared with a year earlier. That is down from 9.7% in the previous quarter.

China says controlling prices is its top priority after inflation hit a three-year high in June. However, other data on Wednesday showed it may be tough to slow growth further. China's factory output grew by a better-than-expected 15% in June, while retail sales surged by 17.7%.